Russian Economy General News: #7

miketheterrible wrote:Yes, and they done it before to Iraq. But do this to major players will get others to hedge against the USD.

Austin wrote:

miketheterrible wrote:Yes, and they done it before to Iraq. But do this to major players will get others to hedge against the USD.

Which means it can happen to Russia too , EU and US can do that to Russia.

Why is central bank so foolish inspite of all sanctions they keep reserve in USD and Euro , Is Putin foolish too

Project Canada wrote:which is why Russia must gradually reduce their reserves in USD/Euro to a minimum, the less leverage the US and its cronies over Russia (and its allies) the better, this will limit US actions to these countries down to only starting a war, which in turn will further expose uncle Scam's real face to the world

andalusia wrote:

Project Canada wrote:which is why Russia must gradually reduce their reserves in USD/Euro to a minimum, the less leverage the US and its cronies over Russia (and its allies) the better, this will limit US actions to these countries down to only starting a war, which in turn will further expose uncle Scam's real face to the world

You make a good point. People on this forum are optimistic Trump will be different than the other presidents, I have plenty of reservations.  Will he continue American financial imperialism or stop it? He says he wants good relations with the world and respects them as partners.  Obama said the same thing and made promises like reducing student loan debt but that did not happen.  

Austin wrote:The CBR does not appear to be working in favour of Russia but the Global Central Bank and that is Bull Shift argument that CBR is independent , All Central Bank work in co-ordination with their Government , The Fed does that , Indias RBI does that and so does EU Draggi.

Russia cannot afford to be passive , How Russia would react to US confiscating its Forex is secondary but primary it should work to secure its asset , It has to be proactive.

I am not saying dump the USD/Euro entirely but just reduce its % from 45/40 % to like 15/15 % that would give US/Euro less leverage over Russia . Cut deal with chinese to keep forex in Renminbi and sell it in same in return for Long Term Investement in Russian Economy , Russia does not need security gurantees from Chinese like Gulf countries need from US but Chinese Economic Investment is what it needs.

The West are going to screw up Russia as long as it plays by its Rule Book . Gold is the Most Prefect Asset outside the power of any Central Bank in world buy it as much as one can , Russia should have Gold Reserves of atleast 5000 Tons , The Germans have around 4000 and US 8000 i.e if they even exisit in US vaults.

Rouble will be at a qualatatively different level if the Forex has 50 % gold reserves but the CBR has to do it. CBR right now is more than happy controlling inflation by High Interest Rates choking the economy of cheap money and thinks it has done a great thing controlling inflation ! Duh

miketheterrible wrote:
So far, US in all intent and purpose, has not blocked Russia's USD in its Forex. If they did do that, then you would see massive shifts going on and not just Russian FOREX but other nations as well. Even if US does block it, the amount in Forex Russia has in other assets is still enough to not damage the nations banking system.  And the Russians, as you pointed out, is increasing their reserves in other currencies such as Yuan.

miketheterrible wrote:They are increasing gold reserves and have used USD to purchase it.  I know you want it to be large amounts of USD converted but that would greatly affect the gold market in price fluctuations.  China also buys small amounts compared to what it can actually afford.

Like I said, understandable your view, but reality is that when Russia imports vital tools and components, it requires USD. Maybe 10 years from now it will be different and Yuan will account for 20% of Forex. Who knows.

And yes, others would dump the Forex of USD to minimum as they would see how volatile it is. If that wasn't the case, US would have blocked it by now. They already have near to total sanction on Russia as is.

Austin wrote:

miketheterrible wrote:They are increasing gold reserves and have used USD to purchase it.  I know you want it to be large amounts of USD converted but that would greatly affect the gold market in price fluctuations.  China also buys small amounts compared to what it can actually afford.

Like I said, understandable your view, but reality is that when Russia imports vital tools and components, it requires USD. Maybe 10 years from now it will be different and Yuan will account for 20% of Forex. Who knows.

And yes, others would dump the Forex of USD to minimum as they would see how volatile it is. If that wasn't the case, US would have blocked it by now. They already have near to total sanction on Russia as is.

Right now Russian Gold Reserves is worth around ~ $55 billion or ~ 1500 Tons , even if they double it it will be just 3000 T , Germany has 4000 T.

Russia needs atleast 50 % of its reserves in Gold , She has nothing to worry as far as security goes.

They can always pay their export in USD who every wishes by their current account which is net positive.

Bottom line is you need to keep the currency with country with whome you trade most.

So if Euro is the largest trading partner with Russia then they can keep 25 % reserves in Euro , If China is 2nd largest then they can keep 20-25 % of it , Russia-US trade is just $30 billion which is very low down the order.

They can keep 40 % reserves in Gold and remaining 10-15 percent in USD/SDR/GBP and what not.

Its a fair thing , This way they can always hedge their risk without overexposing them self to  over night failure like the case now

miketheterrible wrote:

They can, and they are.  Hence why now with Yuan it will be a major (If not majority) of Russia's currency reserves in the future.  Many companies will not take gold as payment and may not exchange it either, so there is a reason for currency reserves.  Germany claims it has 4000T worth of gold in its reserves but I highly doubt it.  Much to the same with America's claim to 7000T of stored gold.  Never has been proven and as far as most are concerned, is gone much like Ukraine's.

The way central bank is behaving it does not look like that , They have been buying more USD recently , just a small rise in Gold purchase. Companies pays from their own pocket and if they want USD the CBR can maintain USD/Euro ratio of say 30 % to take of trade and internal circulation. I am against the whole idea of having full capital account convertibility which lets citizen freely purchase USD/Euro , neither China or India has that.

Simple fact is, world trade is done in USD, regardless if you like it or not.  Until we break away from that, majority of the worlds currency reserves will be in USD.  Of course with the addition of the Yuan, it becomes a much easier way to diversify the reserves and keep it away from the hands of others.  Russia is obtaining gold reserves at a proper pace.  Buying too much of it will cause hyper inflation in the gold price market.  Something no one wants.

Let the world trade in USD but IIRC even 35 % of trade is done in Euro too , As far as Russia goes they can always trade in Euro with  EU and Renminbi with China , two major trading partner , ROW can be in USD if they wish so.

I am not suggesting we break away from USD , I am stating keep the currency you trade most with that way the deterrent works on both sides , With USD Russia does not have much levearage as she has with Europe or China say the way China has with US and she can afford to trade in USD as US will never sanction China.

CBR can certainly increase the buying rate to 500 T per year infact it was doing so at peak of sanction/crisis in 2014/15 but then it slowed down as crisis tapered some what and started purchasing Green Buck

Anyway, we are going in circles here.  You will just have to show patience.  It will take its time but who knows.  Maybe one day Yen and Rupee's will be another major currency in the reserve pool for Russia.

During SU days India and SU used to have Rupee Rouble trade that worked for them well , They can try and go back there , Should work great for both countries

With China with Renminbi in Reserve Basket and China being the largest trading nation in world they can afford to keep Renminbi as Forex reserves.

Russia’s money supply in national definition, or M2, grew 0.46% in July to 36.654 trillion rubles as of August 1, as seen by PRIME in data of the central bank on Wednesday.

The national-definition M2 aggregate includes cash in circulation and Russian residents’ ruble accounts with Russian banks.
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